Every year, Canadians must file taxes and settle any dues under the rules set by the Canada Revenue Agency (CRA), governed by the Income Tax Act (ITA).
Canada employs a marginal tax rate system, where varying tax rates apply to different income levels, known as tax brackets. This structure adds complexity to the taxation process but is designed to be fair by redistributing wealth.
One of the challenging features of this system is the annual changes to the tax rates.
Here’s what you need to know and what to expect in 2025.
What Are Tax Brackets In Canada?
Tax brackets in Canada are structured so that low-income earners pay a lower percentage in taxes than those who earn more. The concept is that the more money an individual makes, the more taxes they will pay. Therefore, tax brackets are used to apply different rates to varying levels of income. In simple terms, the tax rates are the rates you apply to your income to determine your tax owing.
Why Do Tax Brackets Change?
Personal income tax rates are indexed to inflation using the Consumer Price Index. As a result, tax bracket thresholds will increase based on the cost of a basket of various goods and services in Canada.
How Much Taxes Will I Have To Pay In 2025?
Personal income is taxed following a progressive system, both federally and provincially. The following chart outlines the federal and provincial tax brackets in Canada.
What If You Can’t Pay Your Taxes?
If you’re unable to pay your taxes due to debt, there are a few steps you can take:
- Speak To The CRA – You can ask the CRA for a payment plan to pay your taxes. They often have affordable payment arrangements that let you pay your taxes in installments. If you experienced a serious life event, you may even be able to request taxpayer relief, which waives any fees and interest for late tax payments.
- Use A Personal Loan – If the CRA does not offer you a payment plan that best meets your needs, you could opt for a personal loan. A personal loan will allow you to spread the cost of your taxes over a few months to a few years. Moreover, if you have good credit or have collateral to secure it, you may be able to qualify for low rates, which can save you a lot of money.
If you’re unsure of what your credit is, check it out for free on Compare Hub. It’s important you check your credit score before applying for a loan as even a 1% difference in interest can have a huge impact on savings.
Federal Tax Brackets In Canada 2025
| Federal Tax Rate | Federal Income Tax Brackets |
| 15% | Applicable to taxable income up to $57,375 |
| 20.5% | Applicable to taxable income over $57,375 up to $114,750 |
| 26% | Applicable to taxable income over $114,750 up to $177,882 |
| 29% | Applicable to taxable income over $177,882 up to $253,414 |
| 33% | Applicable to taxable income over $253,414 |
Provincial Tax Brackets In Canada 2025
| Province/Territory | Tax Rate and Description |
| Newfoundland and Labrador | – 8.7% applicable to the first $44,192 of taxable income – 14.5% applicable to taxable income over $44,192 up to $88,382 – 15.8% applicable to taxable income over $88,382 up to $157,792 – 17.8% applicable to taxable income over $157,792 up to $220,910 – 19.8% applicable to taxable income over $220,910 up to $282,214 – 20.8% applicable to taxable income over $282,214 up to $564,429 – 21.3% applicable to taxable income over $564,429 up to $1,128,858 – 21.8% applicable to taxable incomes over $1,128,858 |
| Prince Edward Island | – 9.8% applicable to the first $31,984 of taxable income – 13.8% applicable to taxable income over $31,984 up to $63,969 – 16.7% applicable to taxable income over $63,969 |
| Nova Scotia | – 8.79% applicable to taxable income up to $30,507 – 14.95% applicable to taxable income over $30,507 up to $61,015 – 16.67% applicable to taxable income over $61,015 up to $95,883 – 17.5% applicable to taxable income over $95,883 up to $154,650 – 21% applicable to taxable income over $154,650 |
| New Brunswick | – 9.4% applicable to taxable income up to $51,306 – 14% applicable to taxable income over $51,306 up to $102,614 – 16% applicable to taxable income over $102,614 up to $190,060 – 19.5% applicable to taxable income over $190,060 |
| Québec | – 14% applicable to taxable income up to $53,255 – 19% applicable to taxable income over $53,255 up to $106,495 – 24% applicable to taxable income over $106,495 up to $129,590 – 25.75% applicable to taxable income over $129,590 |
| Ontario | – 5.05% applicable to taxable income up to $52,886 – 9.15% applicable to taxable income over $52,886 up to $105,775 – 11.16% applicable to taxable income over $105,775 up to $150,000 – 12.16% applicable to taxable income over $150,000 up to $220,000 – 13.16% applicable to taxable income over $220,000 |
| Manitoba | – 10.8% applicable to taxable income up to $47,564 – 12.75% applicable to taxable income over $47,564 up to $101,200 – 17.4% applicable to taxable income over $101,200 |
| Saskatchewan | – 10.5% applicable to taxable income up to $53,463 – 12.5% applicable to taxable income over $53,463 up to $152,750 – 14.5% applicable to taxable income over $152,750 |
| Alberta | – 10% applicable to taxable income up to $151,234 – 12% applicable to taxable income over $151,234 up to $181,481 – 13% applicable to taxable income over $181,481 up to $241,974 – 14% applicable to taxable income over $241,974 up to $362,961 – 15% applicable to taxable income over $362,961 |
| British Columbia | – 5.06% applicable to taxable income up to $49,279 – 7.7% applicable to taxable income over $49,279 up to $98,560 – 10.5% applicable to taxable income over $98,560 up to $113,158 – 12.29% applicable to taxable income over $113,158 up to $137,407 – 14.7% applicable to taxable income over $137,407 up to $186,306 – 16.8% applicable to taxable income over $186,306 up to $259,829 – 20.5% applicable to taxable income over $259,829 |
| Yukon | – 6.4% applicable to taxable income up to $57,375 – 9% applicable to taxable income over $57,375 up to $114,750 – 10.9% applicable to taxable income over $114,750 up to $177,882 – 12.8% applicable to taxable income over $177,882 up to $500,000 – 15% applicable to taxable income over $500,000 |
| Northwest Territories | – 5.9% applicable to taxable income up to $51,964 – 8.6% applicable to taxable income over $51,964 up to $103,930 – 12.2% applicable to taxable income over $103,930 up to $168,967 – 14.05% applicable to taxable income over $168,967 |
| Nunavut | – 4% applicable to taxable income up to $54,707 – 7% applicable to taxable income over $54,707 up to $109,413 – 9% applicable to taxable income over $109,413 up to $177,881 – 11.5% applicable to taxable income over $177,881 |
Other Tax Changes In 2025
There are several changes individuals need to be aware of for 2025.
- Federal tax brackets in Canada will increase by 2.7% based on inflation.
- The basic personal amount (the amount of tax-free annual income) has increased to a range of $14,538 to $16,129, depending on your total income.
- Employment Insurance (EI) premiums have actually decreased to 1.64%.
- Canadian Pension Plan (CPP) contribution rate will remain at 5.95% for employees and the maximum pensionable earnings have gone up to $71,300. However, as of 2024, if you make above the maximum pensionable earnings, you’ll have to pay a second additional CPP contribution called CPP2.
- RRSP contribution limits for 2025 will now be $32,490 or 18% of earned income, whichever is lower.
- TFSA contribution limits remain at $7,000 for 2025.
What Effect Do The Tax Changes Have On Canadians?
Besides the income taxes you pay, the tax rate and bracket changes can have numerous impacts on various government programs.
Federal Tax Rates
Federal tax brackets in Canada increased by 2.7% to keep up with the Consumer Price Index as reported by Statistics Canada. Tax rates affect how much taxes a person must pay. Tax bracket thresholds increase to keep up with the cost of living. However, the inflation rate is calculated on a federal level and cities with greater costs of living may have higher inflation rates.
The basic personal amount ensures that no tax is paid on a certain amount of income. This is to protect individuals who are close to or below the poverty line from high taxes.
Tax Rates Based on Income
For the million Canadians who earn less than the basic personal income exemption, this is significant as some may not have to pay any taxes at all, but they still need to file. For Canadians in the middle-income brackets, however, the effects are not as prominent. Savings may be equivalent to an extra cup of coffee per paycheque. High-income earners may realize little to no benefit from the increase in basic personal income amount.
Pension Plan
The increase in Canadian Pension Plan premiums means that Canadians will see their mandatory deduction for retirement savings increase per paycheque, which lowers the increase for those earning less.
EI Premiums
Employment Insurance (EI) premiums have decreased to 1.64% for 2025. The decrease in EI premiums, along with an increase in maximum insurable earnings, which is indexed to inflation will have a slight effect on each paycheque.
TFSA Contributions
The Tax Free Savings Account (TFSA) new amount will remain at $7,000 for 2025. This means that eligible contributors will continue to have a cumulative contribution room of $95,000, assuming they didn’t contribute to a TFSA between 2009 and 2024 and were at least 18 in 2009.
Your TFSA contributions do not reduce your taxable income. The advantage is that you won’t pay any taxes on your investment income. Withdrawals from your TFSA are not taxed. Nor does it affect your eligibility for certain government programs, which is great if you’re in a lower tax bracket and want to keep your low tax rate.
Old Age Security Pension
Old Age Security pension payments are considered taxable income. Taxes aren’t automatically deducted each month. You can ask that federal income tax be deducted from your monthly payment by: signing in to your My Service Canada Account
Old Age Security (OAS) For those who receive OAS, the threshold payment is $90,997. If you make more than the taxable income, your OAS will be reduced.
First Home Savings Accounts (FHSA)
The federal government has launched the new tax-free First Home Savings Account. The FHSA allows prospective first-time home buyers the opportunity to save up to $40,000 tax-free towards purchasing their first home, with a $8,000 contribution limit each year.
Multigenerational Home Renovation Tax Credit
This is another new credit, which began on January 1st, 2023. The new credit is equal to 15% of eligible expenses (up to $50,000) for renovations to permit an eligible person such as seniors or persons with disabilities to live with a relative or caretaker.
Final Thoughts
Overall, the tax changes for the year may seem small, but year after year they can have an impact on your finances. Taking the time to do some research may help you save on taxes and get the maximum refund that you are entitled to or the lowest taxes possible. Tax return software and professional tax specialists can help expedite the process and make sure you have everything in order.
